KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research has maintained its “neutral” name on the construction sector with Sunway Construction Group Bhd
(SunCon) and Kimlun Corp Bhd as its prime picks.
The analysis home stated the fluidity of looming elections might weigh on sector sentiment with buyers adopting a wait and see method.
“Sector valuations are on the lower end at 12.9x P/E NTM EPS (5-year average) and 0.65x P/B (-1SD 5-year range). Recent news flow on critical projects like MRT3 is encouraging but we remain cautious on timeline and overall sector earnings execution amidst ongoing virus spread,” it stated.
HLIB stated 4Q21 home contract awards totalled RM6.3bil (54% QoQ, 169% YoY). 2021 featured stronger contributions from water, reasonably priced housing, photo voltaic and highway tasks; non-public jobs remained flattish.
“Moving ahead, we cautiously expect to see gradually improving contract flows as Malaysia progressively enters the endemic stage.
“Our expectations are for a recovery in private sector opportunities and ongoing rollouts of existing projects like ECRL, PBH Sabah & Sarawak, Johor-SG RTS, CSR to support job flows in 2022,” HLIB stated.
It can be trying ahead to the rollout of Sarawak Metro which prices RM6bil.
The Home Ownership Campaign (HOC) and low rates of interest lifting property gross sales in 2021, might see a ramp up in non-public sector contract awards, contemplating the repeated award delays in 2021.
“The downside to this though is dampening of sentiment from HOC expiry, interest rate hikes and rollout delays due to high materials price,” it stated.
“On the public sector side, higher DE does bode well for the general tender environment even with new big ticket projects missing.
“Implementation of existing mega projects should also continue to selectively present opportunities for contractors but we do note that most packages under existing projects have been tendered out therefore limited impact on sector earnings prospects,” it added.
